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Legally speaking: Can “team” members represent different sides to a transaction?

By Peg Ritenour, OAR Vice President of Legal Services/Administration

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This one involves “team” members who represent different parties in a transaction… 

Q: I have several agents who are forming a team. How do they handle agency if one team member represents a buyer who is making an offer to purchase property that is listed with another team member? Although my brokerage practices “split agency,” do the agents have to be dual agents because they are on the same team? Or can each agent represent their respective client?

A: The answer to this question really depends upon the policy you set as a broker with respect to teams and the agency relationships that are established by the team members.

Many teams are set up where all the team members represent all of the clients of the team and this is reflected on the listing and other agency documents. Therefore, if one team member has a listing that is being purchased by a buyer who is represented by another team member, both agents would be dual agents. As such, both agents must conduct themselves in a manner that is consistent with dual agency. This means the agents must both remain neutral, cannot disclose confidential information, cannot negotiate or advocate for either party, etc. This practice often makes sense based upon the nature of the relationships of the agents within the team and also the relationship between the team and its clients.

Some brokers, however, allow teams to practice “split” agency within the team — meaning that the listing agent in the team can represent only the seller and another member of the team will represent only the buyer in a transaction. Of course for this to work the buyer’s agent cannot be listed on the listing agreement as representing the seller. (Remember, teams aren’t licensed and listing agreements need to specify the actual agents in the team that are representing the seller.) Moreover, in order for “split” agency to work within a team, each agent must fulfill his fiduciary duties to his respective client, which includes the duty of loyalty, acting in the best interests of the client, and protecting the client’s confidential information. To comply with this duty of confidentiality, agents within the team cannot have access to the confidential information of the clients of the other agent in the team.

With respect to the issue of loyalty, it is also crucial that agents functioning as a team understand that the interests of their respective clients must come first and that their conduct should not be influenced by their relationship with other team members. For example, often a team may have one agent who is the primary team leader or “rainmaker.” This agent often takes the majority of the listings and refers any buyers to other team members. In this situation, even though a buyer’s agent may get most of her clients from the team leader, she must be careful not to be influenced by this relationship when representing a buyer in a transaction with that team leader.

In making decisions regarding the agency relationships of team members, it is important that a variety of factors be considered by the agents involved and of course their broker. These should include the relationships between the team members, the license law obligations, the ability to protect confidentiality and foremost, the best interests of the clients.

Tags: legal, Legally Speaking